REPORT TO NEW ZEALAND BUSINESS – APEC Business Advisory Council, July

APEC BUSINESS ADVISORY COUNCIL

THIRD MEETING, TORONTO, 24-28 JULY 2017

REPORT TO NEW ZEALAND BUSINESS

SUMMARY

The third meeting of the APEC Business Advisory Council for this year took place in Toronto from 24 to 28 July. New Zealand was well represented by Katherine Rich, Phil O’Reilly and Tenby Powell. During the meeting, ABAC members finalised their annual Letter and Report to APEC Leaders, with recommendations about business priorities for the region, highlighting the need to press ahead with trade liberalisation (including by tackling non-tariff barriers) and structural reform, the importance of digital connectivity, and a number of other elements.

The discussions in Toronto traversed a wide range of topics under the headings of regional economic integration, finance and economics, sustainable development, connectivity and small business. Globalisation was a major focus: members stressed the importance of pressing ahead with trade liberalisation, including the eventual Free Trade Area of the Asia-Pacific (FTAAP) as well as the “Pathways” such as TPP and RCEP, and resolving the collective future vision for the APEC region post-2020. ABAC’s interest in the digital economy remains strong, with discussions around how best to foster digital trade-enabling environments. Discussions also continued on how to empower micro-, small and medium enterprises to participate more fully in global markets.   There was strong endorsement for work led by ABAC New Zealand on non-tariff barriers to trade, including a presentation by Phil O’Reilly on manufacturing NTBs.

REPORT

ABAC New Zealand’s Katherine Rich, Phil O’Reilly and Tenby Powell attended ABAC’s third meeting for 2017 in Toronto from 24 to 28 July. Staffer Stephanie Honey attended in support. Discussions took place in Plenary sessions and in five more detailed themed Working Groups: Regional Economic Integration (co-chaired by Katherine); Sustainable Development; Connectivity; Micro-, Small and Medium Enterprises (MSMEs), and Finance and Economics.

The meeting provided the Council with the opportunity to finalise its annual letter and report to APEC Leaders, due to meet in November, by setting out the business community’s priorities for the region and for the APEC agenda.  ABAC members also finalised letters to APEC Ministers of Finance, Small Business and Health.   A number of senior Canadian political and business leaders spoke during the meeting, including the Hon Bardish Chagger, Federal Minister for Small Business and Tourism and the Ontario Minister for International Trade, the Hon Michael Chan.

Ahead of the ABAC meetings, the Canadian hosts organised two days of tech-related activities including site visits focusing on innovation (including the high-tech Bombardier factory and the MaRS Discovery District, an incubator for high-tech start-ups and more established technology and innovation-heavy businesses) and an “ABACx” workshop which showcased technology firms with a particular emphasis on micro, small and medium enterprises under the heading of ‘Growing Business Partnerships’. The latter initiative will fund research studies, surveys, workshops and training for MSMEs, focused on business entrepreneurship skills, market access and technological innovation. There were also discussions at the OneEleven Innovation Precinct on financial issues including fintech in the Asia Pacific Financial Forum.

Globalisation and trade liberalisation

ABAC members shared their concerns about the rise of protectionism and how to respond to ongoing public debates over globalisation and trade liberalisation. Members agreed that it would be critically important to press ahead with the trade liberalisation agenda in order to ensure sustainable and inclusive growth. The discussion in Toronto was informed by an insightful presentation by a senior economist at Moody’s, who observed that global growth prospects, including for trade, were brightening somewhat, led by emerging markets especially Asia, although there were still downside risks thanks to weak business investment, which had been partly to blame for the slow-down in trade.

Members were given an update on a major research project that ABAC has commissioned from the University of Southern California’s Marshall School of Business. The project will look at harnessing globalization and technological progress for social inclusion and growth. It will entail interviews with a wide range of stakeholders from around the region to gain a deeper understanding of these important issues. The project will also explore possible future approaches to ensuring that trade liberalization and economic growth are inclusive.   (Business communities are likely to be invited to take part in a detailed survey on those issues in the next few weeks.)

These themes around trade liberalization and globalization were central to the ABAC Letter to Leaders and Annual Report. The ABAC Letter to Leaders emphasized the importance of APEC Leaders giving new impetus to both trade liberalization (including by addressing non-tariff barriers, along with pressing ahead on FTAAP and the pathways of TPP, RCEP and the Pacific Alliance) and structural reform in order to achieve innovative, sustainable and inclusive growth. The Letter also stressed the need to reaffirm support for the multilateral rules-based trading system of the World Trade Organisation, looking ahead to the 11^th WTO Ministerial Conference in December. The Letter also placed a strong emphasis on digital connectivity (including the need for consistent regulatory approaches as well as infrastructure investment); on services as an engine for sustained growth; on the need to enable SMEs to participate in trade, and on the need to enhance food security by removing barriers to food trade.

Regional trade architecture: TPP, RCEP, FTAAP and next steps

Closely linked to the discussions about globalisation, ABAC members talked extensively about the trade architecture of the region, along with reflecting on the business community’s vision for the Asia-Pacific region post-2020 (the latter date being the nominal deadline for the achievement of APEC’s trade-liberalising ‘Bogor Goals’).  A small group working on the post-2020 vision, comprised of the ABAC Chair and representatives for each of the host economies for 2018, 2019 and 2020, reported back on their intention to prepare a multi-year work plan for ABAC on the development of the post-2020 vision and to coordinate those efforts with APEC. The group noted that they would take part in the annual high-level dialogue on APEC Toward 2020 and Beyond. They also noted that PECC was developing its own contribution to the post-2020 Vision and that ABAC should seek to engage with PECC as respective ideas were developed. It was agreed to await the outcomes of the SOM3 discussions and PECC’s work before commencing work on ABAC’s own work plan.

Support in the business community remains strong for pressing ahead with the Free Trade Area of the Asia-Pacific (FTAAP). There was discussion about whether the FTAAP per se should be the sole goal for APEC’s post-2020 vision, or whether a less specific and detailed target should be pursued which could encompass a trade agreement such as FTAAP but also broader goals around economic integration and other social dimensions.  There was also endorsement for the APEC FTAAP Work Programme and wide support for the idea that the time to take concrete steps towards realising FTAAP had come.

Members talked at length about the “pathways to FTAAP” – that is, the trade agreements intended as building blocks towards a region-wide arrangement, including the TPP and the Regional Economic Comprehensive Partnership, or RCEP. ABAC New Zealand members were active in these broad geostrategic discussions. There continues to be broad support for ensuring that the substantive and ambitious outcomes of the TPP are not lost. (This was likewise reflected in the ABAC Letter to Leaders and press release.) There was also discussion about the importance of trying to ensure that RCEP delivered as ambitious and liberalising an outcome as possible. Members also received an update on the Pacific Alliance and the new negotiations in view between the Pacific Alliance and a number of other APEC economies, including New Zealand.

There was also a presentation on the merits of plurilateral/multi-party trade agreements over bilateral FTAs, argued on the basis of the benefits that the former would have for global value chains, structural reform and against trade diversion. Of particular interest, modelling was shared that showed that New Zealand would in fact be slightly better off under a “TPP-11” scenario (that is, without the US) than it would have been under TPP, thanks to reduced competition from US agricultural exports in key markets.

Members also affirmed their ongoing support for the WTO as the foundation for the global trading system, looking ahead to the end-of-year WTO Ministerial Meeting in Buenos Aires. Members were hopeful that the Buenos Aires Meeting would deliver ambitious outcomes, and also that the WTO Trade Facilitation Agreement would be implemented promptly by more WTO (and APEC) members.

Liberalising trade and investment: NTBs and services

Building on a series of presentations over the past eighteen months in ABAC on non-tariff barriers, including securing agreement to the (New Zealand-initiated) trade-friendly, WTO-consistent ABAC Cross-Cutting Principles on NTMs/NTBs, Phil O’Reilly presented on the sectoral example of manufactured goods to illustrate how the cross-cutting principles could apply in the real world to help reduce the stifling impacts of NTBs on global value chains and other trade in manufactured goods.  The ABAC New Zealand team was also able to build on that presentation and the other New Zealand NTB presentations that had preceded it to secure very strong and positive language in the ABAC Letter and Report to Leaders on NTBs, including seeking Leaders’ adoption of the ‘cross-cutting principles’ along with an emphasis on the importance of eliminating NTBs, including for food trade, for reasons of overall economic growth, to foster global value chains and for food security.

As in previous meetings, a further significant focus for ABAC work during the week was on the services liberalisation agenda. ABAC members once again discussed their priority interests among the 14 listed areas in the 2016 Roadmap for the APEC Services Cooperation Roadmap (ASCR), intended to expand the services sector and boost services trade in the region. Following an excellent presentation by the Convenor of the APEC Group on Services, it was agreed that there was considerable scope for greater collaboration between ABAC and the APEC Group on Services, including through a joint work programme. Members agreed that ABAC’s inputs in each of the 14 ASCR action areas would be reported to APEC fora and to APEC Senior Officials.

Promoting connectivity in the region

Members discussed institutional, physical and digital connectivity in the APEC region.  Greater connectivity through the digital economy was a recurrent theme throughout the week’s meetings, building on the tech site visits at the start of the programme, along with one of the regular update sessions on the ‘CBET Network’, or Cross-Border e-Commerce Training, designed to open up opportunities for SMEs through cross-border e-commerce.

There were fascinating presentations from the World Bank on the implications of the digital transformation of the global economy for future jobs, and possible approaches to address this including through education systems; from ABAC China on a new “Digital Trade Index” – a big data-based diagnostic to quantitatively assess the level of digital trading readiness and potential across global value chains – and from ABAC USA about the widening digital divide, with some economies racing ahead in terms of capability, infrastructure and engagement, and others lagging behind. There was also discussion (reflected in the Letter to Leaders) about the importance of a coherent global regulatory environment for the digital economy, including in relation to cybersecurity and privacy protection, led by ABAC USA.

There was also an update from ABAC Australia on APEC’s structural reform agenda for 2018. It was proposed that ABAC could contribute to next year’s annual APEC report on structural reform, perhaps with an emphasis on the digital economy and its importance to business.   It was suggested that ABAC should look in particular at regulatory reforms and their impact on innovation and the development of the digital economy in connection with business growth.   Funding will be sought under the ABAC research budget, with a proposal to be considered by Plenary at the next meeting.

ABAC Japan gave a report on progress with Global Data Standards (GDS) in Japan. As has been the case with broader assessments of APEC-wide GDS pilots, ABAC Japan noted some of the challenges in implementing GDS but also some of the significant benefits in terms of connectivity, efficiency and supply-chain integrity. ABAC Japan noted in particular that new technologies such as blockchain could usefully be explored alongside existing technologies such as barcoding and RFID tracing.   It was agreed that a representative from GS1 could take part in the next meeting in Da Nang to discuss these ideas.

Enhancing MSME integration in global markets

ABAC members explored ideas about how to enable micro-, small and medium enterprises (MSMEs) to participate more fully in the regional economy and in global value chains, drawing on some of the learnings from the ABACx event and the Asia Pacific Financial Forum that had preceded the meeting. Other topics discussed included ‘B Corp’ (a governance and ecosystem to enhance SME-driven innovation; the 2^nd annual B Corp Forum will be held on 31 August in Chinese Taipei); and an update on WeConnect and other efforts to strengthen the participation of women in the digital economy.  The Council also finalised a Letter to APEC SME Ministers.

New frontiers for finance and economics

On finance and economics, there was a very insightful presentation on ‘the connected economy’, including the cutting-edge new approaches to how companies connected with customers, the benefits of cross-border data and information flows and the need for supportive regulatory settings.   ABAC Papua New Guinea noted that they would host a fintech/digital divide event next year, at which many of the digital economy issues would be explored.   It was agreed that ABAC should seek to work closely with APEC groups on these issues.  Other topics discussed included an update on China’s Belt and Road Initiative (including the recent Belt and Road Forum held in Beijing in May); an update on APEC’s work on infrastructure development; the ongoing work of the Asia Pacific Financial Forum, and the Pacific Alliance Financial Integration Agenda. The Council also finalised its annual Letter and Report to APEC Finance Ministers.

Next meeting, APEC CEO Summit and APEC Leaders’ Week

ABAC IV will be held in Da Nang, Viet Nam, from 4 to 7 November, ahead of the APEC CEO Summit (8-10 November) and APEC Economic Leaders’ Meeting, along with the ABAC-Leaders’ Dialogue (9-11 November).

PwC Canada provided an update on the annual APEC CEO Survey. This year’s survey themes included investment intentions; the future of trade; managing digital transitions, and the role of APEC. The final results of the survey would be shared at the APEC CEO Summit. 

Further information

Further information on the issues mentioned in this report is available at www.nzibf.co.nz and www.abaconline.org. Copies of reports and studies mentioned in this update are available on request from Stephanie Honey, stephanie@honeyconsulting.co.nz.